Airline Industry

Airline Industry

Kristy Clark Doskocil

Axia College University of Phoenix

Why do airlines offer a lower airfare with the purchase of a ticket 14 days in advance? The answer is quite simple; airlines know that a person going on a leisure flight will be purchasing a ticket 14 days in advance and flexible. For a person traveling on business their schedule is not flexible and they will not be able to stay overnight in most cases. Airlines can setup the supply and demand for the flights with this information and increase prices in order to make the difference for the seats that did not sell for leisure flights. Airlines determine the demand and supply of tickets that are purchased by passengers that are flexible and not flexible. Airlines also look into which days most people travel and if they stay the night at their final destinations.

The price of tickets brings about the supply and demand equilibrium for the supply of airline tickets. If there is an increase of profits that will bring about the supply of tickets in turn will reduce the price of airline tickets. If the profits decrease the price of tickets will rise and thus will slow down the demand of airline tickets. If the prices rise to high the demand will not be met and will not recreate the equilibrium of the supply and demand that is needed for airlines to operate. Airlines also have a fixed route and schedule for certain times and days of the week. With the airlines using this method they will use the revenue management to help with the distribution of supply and demand. Mr. Scott D. Nason, American Airlines says, "I believe that there will be (at least) four primary drivers":

pricing transparency

computing power and database manipulation

understanding of consumer behavior (especially web analytics)

consumer tolerance